Fall Economic Statement commentary

Yesterday Deputy Prime Minister and Minister of Finance Chrystia Freeland shared the 2022 Fall Economic Statement (FES). As the ongoing war in Ukraine impacts global economies, and Canadians face the realities of rising inflation, the FES had to strike a fine balance.  

Yet, the risk posed by climate change remains, and investments in green building must continue. From CAGBC’s perspective, here are three highlights.  

Investment Tax Credit on Energy Generation, Storage and Heat Equipment 

Meeting Canada’s carbon reduction targets will require investment in the electrical grid and renewable energy. Over the last few months, CAGBC discussed with government officials the importance of low-carbon materials and mechanical systems. At an October roundtable with Minister of Innovation, Science and Industry François-Philippe Champagne, we discussed how Canada can answer the United States’ Inflation Reduction Act and its incentives for low-carbon materials and mechanical systems.  

First announced in Budget 2022, the FES give more details on the products covered by the Investment Tax Credit for Clean Technologies (class 43.1) It is a refundable tax credit equal to 30 percent of the capital cost for several products and designed to shift the market towards low-carbon energy. Products include: 

• Electricity Generation Systems, including solar photovoltaic 
• Stationary Electricity Storage Systems that do not use fossil fuels in their operation 
• Low-Carbon Heat Equipment, including active solar heating, air-source heat pumps, and ground-source heat pumps; and, 
• Industrial zero-emission vehicles and related charging or refueling equipment, such as hydrogen or electric heavy-duty equipment used in mining or construction. 

Support for workforce is also part of this investment area, as the FES leverages the tax credit to incentivize job creation. The Investment Tax Credit for Clean Technologies will last until 2032. As proposed, it is expected to cost $6.7 billion over five years, starting in 2023-24.  

Workforce Development

A significant part of our discussions with public servants and elected officials are around the economic opportunity new green buildings and deep carbon retrofits present, and the need to upskill and expand the workforce. The sector is facing shortages but has a huge growth potential – possibly tripling by 2030 up to 1.5 million jobs.  

Seeing Employment and Social Development Canada (ESDC) programs focused on the green building sector is a positive sign. FES proposes $250 million over five years, starting in 2023-24, to ESDC to help ensure Canadian workers can thrive in a changing global economy. 

Specific measures discussed include:  

• The Sustainable Jobs Training Centre: one of its focus will be on jobs and skills development in low-carbon buildings (new and retrofits)  The FES estimates it will help 15,000 workers to upgrade or gain new skills,.  
• A new sustainable jobs stream under the Union Training and Innovation Program which supports union-based apprenticeship training in the skilled trades. They expect that 20,000 apprentices and journeypersons would benefit from this investment. 
• The Sustainable Jobs Secretariat will offer a one-stop shop for workers and employers to access information on federal programs, funding, and services across government departments. 

Launching the Canada Growth Fund 

The FES also provided insight into the Canada Growth Fund announced in last Budget, which proposes to attract new private capital investment in the low-carbon economy. Among the approaches:  

• “Provide a flexible suite of investment tools, including but not limited to concessional loans and contracts for difference that provide a more predictable environment by reducing price and other risks. For example, carbon contracts for difference ensures long-term investments in decarbonization and clean technologies are based on a predictable price on carbon pollution and carbon credits.”   

The government plans to launch the Growth Fund this year under the Canada Development Investment Corporation (CDEV), but will move it to a permanent, independent structure early in 2023. CAGBC sees the Canada Growth Fund as an interesting financial tool to support research and development, which can help drive Canadian low-carbon innovations. We will follow its development closely.   

Takeaways 

Overall, these announcements are positive first steps in responding to the US Inflation Reduction Act by supporting investment and innovation in the green building sector. This will help Canada’s efforts to reach the goal of decarbonizing all large buildings.  

Tackling climate change and transitioning the building sector and economy to low-carbon will require a whole-government approach that encourages collaboration between departments to achieve the decarbonization of Canada’s buildings. 

As we turn to the development of Budget 2023, CAGBC is looking forward to discussions with Finance Canada and Minister Freeland’s Office regarding levelling the playing field between the USA and Canada. We are also advocating for more support for the Green Buildings Strategy, picking up from our recommendations. We hope to see focus on a building data strategy, support for SMEs that seek Environmental Product Declarations, and funding to create industry-led guidelines for zero -carbon transition planning.